Company Profile (excerpt from Reuters): World Fuel Services Corporation, incorporated on July 20, 1984, is engaged in providing aviation, marine and land energy, logistics and technology solutions to customers and suppliers around the world. The Company operates through three segments: Aviation, Marine and Land. In its Aviation segment, the Company offers fuel and related products and services to commercial airlines, second and third tier airlines, cargo carriers, regional and low cost carriers, airports, fixed based operators, corporate fleets, fractional operators, private aircraft, military fleets and the United States and foreign Governments, as well as intergovernmental organizations. In its land segment, the Company offers fuel, crude oil, lubricants, power solutions through its global energy management service offerings, natural gas and related products and services to customers. Under marine segment, it offers fuel, lubricants and related products and services to customers, including international container and tanker fleets, commercial cruise lines, yachts and time charter operators, offshore rig owners and operators, the United States and foreign governments, as well as other fuel suppliers.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass 6 out of the following 7 tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$1,496,629,367||Fail|
|2. Sufficiently Strong Financial Condition||Current Ratio > 2||1.41||Fail|
|3. Earnings Stability||Positive EPS for 10 years prior||Fail|
|4. Dividend Record||Dividend Payments for 10 years prior||Pass|
|5. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||-81.95%||Fail|
|6. Moderate PEmg Ratio||PEmg < 20||25.28||Fail|
|7. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||0.86||Pass|
|Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.|
|1. Sufficiently Strong Financial Condition||Current Ratio > 1.5||1.41||Fail|
|2. Sufficiently Strong Financial Condition||Debt to NCA < 1.1||0.73||Pass|
|3. Earnings Stability||Positive EPS for 5 years prior||Fail|
|4. Dividend Record||Currently Pays Dividend||Pass|
|5. Earnings Growth||EPSmg greater than 5 years ago||Fail|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||-4.25%|
|MG Value based on 3% Growth||$12.83|
|MG Value based on 0% Growth||$7.52|
|Market Implied Growth Rate||8.39%|
|% of Intrinsic Value||2181.39%|
World Fuel Services Corp does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, low current ratio, insufficient earnings stability or growth over the last ten years, and the high PEmg ratio. The Enterprising Investor has concerns regarding the low current ratio, and the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.
As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $2.85 in 2014 to an estimated $0.88 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.39% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value below the price.
At the time of valuation, further research into World Fuel Services Corp revealed the company was trading below its Graham Number of $33.41. The company pays a dividend of $0.24 per share, for a yield of 1.1% Its PEmg (price over earnings per share – ModernGraham) was 25.28, which was below the industry average of 49.12, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $1.03.
World Fuel Services Corp receives an average overall rating in the ModernGraham grading system, scoring a C-.
Stage 3: Information for Further Research
|Net Current Asset Value (NCAV)||$1.03|
|Number of Consecutive Years of Dividend Growth||0|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||3/1/2018|
|Total Current Assets||$3,770,700,000|
|Total Current Liabilities||$2,670,100,000|
|Shares Outstanding (Diluted Average)||67,900,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$1.95|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$0.88|
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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours. See my current holdings here. This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions. ModernGraham is not affiliated with the company in any manner. Please be sure to review our detailed disclaimer.